There are a lot of lingering questions about mortgage refinance. Since refinance helps you lower your monthly payment and interest rates a lot of people believe there is some sort of catch to it. There is no catch to mortgage refinance, it's just good business. So what are you waiting for?

Why Mortgage Refinancing?

You know interest rates are at all-time lows. You've heard about mortgage refinancing. Now you would like to know exactly why you should consider it for your home mortgage. We've put together some information on why mortgage refinancing makes sense and how it can save you money.

Reasons to Consider Mortgage Refinancing

Here are some of the reasons you might want to think about mortgage refinancing:

  • Reduce monthly payments.If your goal in mortgage refinancing is to reduce your monthly payments, then you can refinance your mortgage for a longer term. This means you will pay more in interest charges overall, but it will reduce your monthly payment burden. If you're struggling to make your monthly payments, you might consider this.
  • Lock in a lower fixed rate.If you took out a mortgage at a time when interest rates were higher than they are now, mortgage refinancing might make sense. A rule of thumb for when to refinance is if present interest rates are % to 5/8% lower than the interest rate on your current mortgage.
  • Build home equity. For those of you whose financial situation has changed to allow you to increase your monthly payments, you can use mortgage refinancing to refinance for a shorter term. This enables you to build equity in your home faster because you can pay off your mortgage sooner. You will save considerably on interest charges in doing so.
  • Change to an adjustable rate mortgage (ARM) or a fixed rate. You might want to use mortgage refinancing to switch the type of interest rate on your mortgage. For example, if you have a fixed rate mortgage currently, you could switch to an ARM that offers lower initial interest rates. To do this, you must be comfortable with the possibility of fluctuations in your rate down the road. If you think interest rates are on their way up and/or are not comfortable with a variable rate mortgage, you might consider locking in a low fixed rate. This will make your monthly payments consistent for the life of the loan.
  • Better features on your adjustable rate mortgage. ARMs come with certain limits on how much payments may increase per year and over the life of the mortgage. If you are unhappy with the caps on your current ARM, you could use mortgage refinancing to negotiate for a new ARM with better features.
  • Get cash from home equity. If you have a major expense on the horizon, such as financing a college education or home renovations, you might use mortgage refinancing to get cash from your home equity. To do this, you would take out a new mortgage with a larger principal. You will hear this option referred to as "cash-out refinancing." This is a secured loan, which means you can usually get dramatically lower rates than you could with unsecured loans, like credit cards.

Mortgage Refinancing